Full Text
HIGH COURT OF DELHI
Date of Decision: 15.05.2024
SHARDA GARG .....Plaintiff
Through: Mr. Vivekananda, Adv.
Through: Mr. Siddharth, Panel Counsel
JUDGMENT
1. This is a petition/suit filed under Section 14 of the Arbitration Act, 1940 (hereinafter referred to as “1940 Act.”) seeking issuance of notice to defendant Nos. 3 and 4, the Co-arbitrators to file the original Award dated 28.08.2014 along with arbitral record in this Court.
2. Pursuant to the registration of the petition, the defendant no. 1 on 23.07.2015, submitted the Arbitral Award in a sealed cover before this Court.On 27.08.2015, the parties accepted notice of filing of the Arbitral Award.
3. Thereafter, the plaintiff filed the objections to the Arbitral Award under Section 30 and 33 of the 1940 Act on 26.09.2015 and the same was registered as I.A. 21601/2015.
4. Notice in I.A. 21601/2015 was issued to the defendant(s) on 13.10.2015 and thereafter, the reply to the objections was filed.
5. Briefly stating the facts are that the plaintiff is the sole proprietor of M/s T.K.Construction Co. and has been doing business of contractors under this name and style with the Northern Railways.
6. The work under the name and style of Zone-II: Supplying and stacking hand-broken stone ballast (hard stone) conforming to Northern Railway CE's Circular No. 170/P. way along cess/toe from Km 50/0 to Km 100/0 and ballast depot at Marwar Mathania or Samaru in connection with the Jodhpur–Jaisalmer B.G. Conversion Project—5000 cum and 42700 cum (hereinafter referred to as ―project‖) was awarded to the plaintiff by the Chief Administrative Officer, Headquarter Office, Northern Railway, Kashmere Gate, Delhi, vide his letter dated 26.07.1994.
7. Subsequently, an Agreement bearing No. 74-W/GC/9/JU-JSM/WA dated 17.08.1994 was executed at Delhi between the plaintiff and the Chief Engineer/C/GC, Northern Railway, Kashmere Gate, Delhi.
8. Soon after, certain disputes arose between the parties and the plaintiff invoked arbitration vide letter dated 04.09.1995, during the execution of the project and 04.09.1996, after the completion of project.
9. Despite repeated requests, since the defendant No. 1 did not appoint an arbitrator, the plaintiff filed a petition under Section 20 of the 1940 Act, registered as CS(OS)2755/1996.
10. The defendant No. 2 contested the said case and this Hon’ble Court vide order dated 27.09.2005 referred Claim Nos. 1,2,3,7,9,10,11 and 12 therein to arbitration with a direction to the arbitrator to be appointed by the defendant to make and publish award within four months of entering upon the reference.
11. Thereafter, the Arbitral Tribunal was constituted on 10.07.2006, comprising of 2 arbitrators and the arbitral proceedings commenced.
12. The Arbitral Tribunal so appointed published the Arbitral Award on 28.08.2014 and communicated the same to the parties vide letter dated 03.09.2014. The Arbitral Award was received by the plaintiff on 03.11.2014. It is this Award which is challenged in I.A. 21601/2015.
13. Mr. Vivekananda, learned counsel for the plaintiff even though in the pleadings has challenged the ArbitralAward on numerous grounds, but restricts his arguments to the extent that the Award is in violation of principles of natural justice.
14. Mr. Vivekananda, learned counsel appearing for the plaintiff and Mr. Siddharth, learned counsel for the defendant(s) have made detailed submissions.
15. I have heard learned counsels for the parties.
16. In the present case, it is an admitted position that since the officers of the defendant(s) kept on changing, the Arbitral Tribunal initially appointed was reconstituted again and again.
17. The Arbitral Tribunal comprising of Mr. Rupesh Singhvi, Sr. D.F.M./NWR, Jodhpur, Rajasthan (Co Arbitrator) and Mr. Dinesh Deshwal Sr. DEN, Ajmer (Co Arbitrator) held their first hearing on 20.03.2009.
18. On 20.03.2009, the defendant was directed to submit the following documents, and paragraphs 1 and 4 of the order read as follows:
iv. Photo copy of correspondence letters between both the parties before final bill …….
4. Respondent is advised to produce all the relevant files of Dy. CE/C/JU office as well a concerned H. Qtr office file during the next meeting.”
19. In the subsequent proceedings held on 28.08.2009, it is evident that the documents in terms of the order dated 20.03.2009 had not been filed. The order sheet(s) dated 19.02.2010 and 21.05.2010 further indicate that the defendant was granted an additional one month to file their remarks to the documents submitted by the plaintiff.
20. Thereafter, vide letter dated 14.09.2010, the plaintiff was informed that the next arbitration meeting has been fixed on 27.09.2010 at 11:30 hrs at Jaipur. For reference, the letter is reproduced as under:
21. The plaintiff duly responded to the said lettervide letter dated 25.09.2010, stating that the arbitration proceedings have been continuing since the past 4 years, during which he has invested considerable time, effort, energy, and financial resources. He also mentioned his advancing age and, accordingly, requested that the arbitration be conducted at Delhi. Letter dated 25.09.2010 is reproduced as under: (pdf 265)
22. Thereafter, vide order dated 27.09.2010, arbitration proceedings were conducted, and Paragraph 4 of the said order clearly stated that the next date of hearing would be fixed after scrutiny of the documents. Further, the said observations leads to an inference that the documents as contemplated in the order dated 20.03.2009 were filed before the said date/ on the said date.
23. Order dated 27.09.2010 is reproduced as under:
24. My attention has also been drawn to the letter dated 15/17.02.2012 which indicates that since one of the co-arbitrators i.e. Mr. Dinesh Deshwal had resigned, the plaintiff was given an option to nominate one of the arbitrators within the list provided by the defendant in the said letter(s). Letter dated 15/17.02.2012 as under:
25. The plaintiff duly responded to the said letter on 01.04.2012, stating that any person may be appointed as a co-arbitrator and requested that the hearing be fixed in Delhi/New Delhi. The letter dated 01.04.2012 is reproduced as under:
26. Thereafter, the plaintiff did not receive any notice or information regarding the arbitration hearing or any further proceedings. On 03.09.2014, the plaintiff received a letter stating that the Arbitral Award has been made and signed on 28.08.2014 and both the parties (defendant and plaintiff) are advised to make the payment of the Arbitral Tribunal. The letter dated 03.09.2014 reads as under:
27. The plaintiff duly replied to the said letter on 11.09.2014 stating that in terms of the letter dated 03.09.2014, the plaintiff is depositing the fee without prejudice to his rights and contentions. The letter dated 11.09.2014 is reproduced as under:
28. Thereafter the present petition has been filed.
29. A perusal of the aforesaid facts show that the last communication between the plaintiff and the defendant was on 01.04.2012 and between the plaintiff and the Arbitral tribunal was on 25.09.2010.
30. The Arbitral Tribunal was reconstituted on 14.06.2012, pursuant to the letter dated 01.04.2012 issued by the plaintiff. In the letter dated 01.04.2012, the plaintiffhad categorically mentioned, that any of the names suggested by the defendant by way of the letter dated 15/17.02.2012 could be appointed as a co-arbitrator, but the hearing should be fixed in Delhi.
31. Thereafter, the plaintiff was neither informed about any further hearings nor was he called upon to appear in the arbitral proceedings. Throughout, the plaintiff remained under the bona fide impression that he would be given due notice regarding the appointment of Arbitral Tribunal as well as the dates of the hearings.
32. Although the defendants have asserted that the plaintiff was at all times aware of the reconstitution of the Arbitral Tribunal and the subsequent hearings conducted by it, there is no document on record to demonstrate that the plaintiff was ever informed about the constitution of the Arbitral Tribunal, notified of any hearingsor was heard in support of his contentions before the passing of the impugned Arbitral Award.
33. Therefore, I have no hesitation in concluding that the Arbitral Award dated 28.08.2014 is violative of the principles of natural justice, having been rendered without affording the plaintiff an opportunity of being heard or allowing the plaintiff to advance his submissions.
34. Additionally, the documents filed by the defendants were not furnished to the plaintiff, a fact which is also noted in the Arbitral Award.
35. In this regard, the reliance placed by the plaintiff on the judgment of this Hon’ble Court in Lovely Benefit Chitfund& Finance (P) Ltd. v. Puran Dutt Sood, 1983 SCC OnLine Del 22 is well placed. The operative portion reads as under:
36. A perusal of the aforesaid judgment shows that the Arbitrator should comply with the Principles of Natural Justice and give ample opportunity to each party to substantiate its case and advance arguments.
37. The Principles of Natural Justice is an integral part of all judicial proceedings and arbitration is no exception. Violation of Principles of Natural Justice goes to the root of the proceedings and vitiates the very foundation. In this regard, reliance is placed on the judgment passed by the Hon’ble Supreme Court in Central Organisation for Railway Electrification vs ECI SPIC MCML (JV) A Joint Venture Company 2024 SCC OnLine SC 3219 and more particularly paras 80 and 81 which reads as under: ―80. Article 14 is an important facet of administrative, judicial and quasi-judicial decision-making in India and demands fair play in action. The object of observing the principles of natural justice is to ensure that “every person whose rights are going to be affected by the proposed action gets a fair hearing.” The non-observance of natural justice is itself a prejudice to any person who has been denied justice depending upon the facts and circumstances of each case. The principle of procedural fairness is rooted in the principles of the rule of law and good governance. In Madhyamam Broadcasting Limited v. Union of India, this Court held that the requirement of procedural fairness “holds an inherent value in itself.” It was further observed: “42. Inherent value in fair procedure: Fair procedure is not only a means to the end of achieving a fair outcome but is an end it itself. Fair procedure induces equality in the proceedings.The proceedings „seem‟ to be and are seen to be fair.”
81. We recognize that arbitration is a private dispute settlement mechanism. Yet, it is statutorily subject to the principles of equality and fairness contained under the Arbitration Act.......... Resolution of private disputes following the minimum statutory standards of equality and fairness is essential not only in the interest of justice, but also to uphold the integrity of arbitration in India. (emphasis supplied)
38. From the facts narrated above, the plaintiff had no knowledge about the reconstitution of the Arbitral Tribunal, and the entire arbitral proceedings were conducted behind his back without hearing the plaintiff..
39. For the reasons noted above, the I.A. 21601/2015 is allowed and the Arbitral Award dated 28.08.2014 made and published by the defendant Nos. 3 and 4 (co-arbitrators) is set aside.
40. Since the Arbitral Award is being set aside solely on the ground of violation of the principles of natural justice, the other contentions raised by the plaintiff have not been addressed or adjudicated upon by this Court.
41. Accordingly, suit is also disposed of.